Anyone bought or owned a roofing business? Tips, advice, cautions appreciated

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December 16, 2020

by a searcher in St. Louis, MO, USA

Background: I am a first time Acquisition Entrepreneur and would like to build a portfolio of businesses, ideally with some synergy that can be exploited. So the industry I choose and the first business I buy has to succeed. I do not want to be heavily involved in the day to day after say 9 months post acquisition.

I am heading down tomorrow morning to spend the day with the seller of a residential roofing company. It is 2 hours south of St. Louis in a town of about 80k people. The asking price is 750k. The company historically###-###-#### has done 2 million revenue with SDE around 300k. In 2019 he did 4 million revenue with SDE of 500k###-###-#### annualized is about 3.5m revenue and 400k SDE. There are a number of factors at play as to why the numbers increased so dramatically.

1. a big storm hit the town that year.
2. He got a large commercial contract (nursing home)
3. He knew he wanted to sell and the broker told him he had to start putting all of his cash jobs into the books to elevate the value of the business.

Some risks I can see: The owner is very involved. Business is run out of his house. Only has 3 employees, all crew leaders. He contracts the labor from some guy named Fernando.

Some Opportunities: Seller is willing to finance 80% of the deal...Why? I think he wants to avoid taxes somehow. But maybe he thinks a bank won't loan the money to a buyer without roofing experience? I do not have more details yet on his financing offer.
He does no marketing. Has an A+ rating with BBB but doesn't do yelp or Homeadviser etc.

I am hoping for and open to all advice on the roofing industry itself, what to look for and ask about while spending the day with him tomorrow, how to negotiate a better deal, how to find a general manager to run the operations etc.

I know this was long winded. Thanks to any of you who read it.

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commentor profile
Reply by a searcher
in Loudon, NH, USA
^redacted‌ I'm building a multi company portfolio as well and at the same point in the journey. I'm fairly industry agnostic but am trying to identify targets in industries where the businesses are less owner centric. Like you, I can't run the day-to-day indefinitely otherwise it makes it hard to carve out time to source acquisition #2+. I'm drawn to home services as well but think the company needs to have more FTE's with some tenured GM's to avoid buying a job. In your example, I don't know how much of that SDE you'd need to have to paid a GOOD GM to run the show for you but would seem there is enough to work with unless SDE drops.
commentor profile
Reply by a searcher
from Villanova University in Greenwood Village, CO, USA
You are buying a job on this one, not a business. Make sure he is there for 6-12 months for the transition / training. I bought a home service business 1 hour south, and the commute is brutal. I signed up for it, and am scaling to the point where we can have a GM, but keep in mind., each time you have a warranty, or an issue, you will be hopping into the car to your businesses primary market.
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